Gold Dips From An All-Time-High And Settles Below $2270.00 Level on Rising U.S. Dollar Demand, U.S. NFP Data Looms

Key Takeaways:

• Gold (XAU/USD) sank below the $2270.00 level on Friday, weighed by the generally stronger U.S. dollar
• Hakwish's Fed remarks extend heavy support to the greenback, which in turn helps cap the upside for the XAU/USD cross
• Uncertainty about the timing of the rate cuts, along with rising geopolitical risks, remains supportive of gold and might help limit further losses
• Market attention entirely shifts toward the release of the key U.S. monthly jobs report data report

Gold (XAU/USD) price dropped to $2270.00 an ounce on Friday during the Asian session, extending Thursday's pullback from an all-time high/ $2305.791 level as overnight hawkish Fed remarks lent heavy support to the greenback, helping it recover further from over a two-week low and in turn helping cap the upside for the XAU/USD cross.

Notably, Richmond Fed President Thomas Barkin said on Thursday that he was open to interest rate cuts once it was clear that progress on inflation would be sustained and applied more broadly in the economy. Minneapolis Fed Bank President Neel Kashkari also said he penciled in two rate cuts this year at the March meeting. However, none may be required if inflation continues to move sideways.

The hawkish Fed talks and the hot U.S. consumer and wholesale inflation readings suggest that the Fed might be forced to keep rates higher for longer to rein in inflation in the U.S.

Furthermore, the U.S. labor market continues to be tight, as revealed by the latest U.S. Department of Labor report. The number of people claiming unemployment benefits in the U.S. surged by 11,000 from the previous week's upwardly revised value to 221,000 on the period ending March 30th, the most in two months, and well above market expectations of 214,000. Despite this, the labor report continues to point to the historical tightness of the U.S. labor market, adding leeway for the Federal Reserve to prolong its hawkish stance into 2024, if necessary, to lower inflation.

That said, markets feel convinced that the Fed will leave rates unchanged during the May meeting and start cutting rates during the third quarter of 2024, which remains supportive of Treasury bond yields and further gold selling.

However, the uncertainty about the timing of the rate cuts and rising geopolitical risks continue to temper investors' appetite for risk-perceived assets and further benefit gold.

This, in turn, warrants caution to traders against submitting aggressive bearish bets significantly ahead of the release of the U.S. monthly jobs report, popularly known as non-farm payrolls (NFP) data, on Friday. According to market consensus, the U.S. economy is expected to have created 212K jobs in March, down from 275K in February. Additionally, last month's average hourly earnings are expected to have risen to 0.3%, up from 0.1% in February.

As we advance, investors await the release of the U.S. NFP data set during the mid-North American session. The data would influence U.S. dollar price dynamics and provide a directional impetus for the XAU/USD pair.